Is the Mount Everest of Albany Corruption Starting to Crumble?

August 28, 2015

If Albany is the Himalayas of political corruption, then its Mount Everest is the towering peak is the “LLC Loophole.”  But this mountain of legal political corruption maybe about to crumble thanks to separate July lawsuits by the Brennan Center for Justice, and the Board of Election’s own enforcement counsel. The LLC loophole is a bizarre legal fiction created in 1996 by a vote of the  State Board of Election which decided to treat Limited Liability Companies more like a human beings than corporations or business partnerships.  Since “natural persons” can donate far more than corporations, this blew a giant hole in campaign finance rules intended to reduce influence of money in our state democracy. More so, one person can create dozens of LLCs and give huge amounts of money through every single one of them. According to the Brennan Center, one contributor ” used 27 LLCs to contribute $4.3 million over two years.”  Worse yet, LLCs are fairly easy to create, and are easy to “layer” or “stack” so that one LLC owns another, this can make it hard to figure out who is actually donating to politicians. LLCs are heavily used by real estate developers, including those like Glenwood Management, which is the state’s largest political contributor and was implicated in both the Sheldon Silver and Dean Skelos corruption scandals.

It is no secret that the LLC loophole massively facilitates what amounts to legal corruption. Over its 19 year existence, the loophole has been blasted by dozens of editorials and excoriated by reform groups. Maddeningly, the loophole could be closed at any time by the state legislature. Indeed, the Democratic controlled Assembly passed a bill this session which closes the loophole. Unfortunately, Senate Republicans will not close the loophole because, in a Democratic state, they rely on a gusher of money from big NYC real estate owners steered through LLCs. These real estate interests essentially pay Republicans to block laws which favor tenants and to maintain gigantic real estate tax subsidies like the 421-a program. Where Governor Cuomo really stands on closing the LLC loophole is a mystery. Thanks to the GOP senate recalcitrance, he has not been forced to sign or veto any LLC reform legislation, so he can blame the Senate Republicans for inaction. This said, the governor is by far the single largest recipient of contributions steered through LLCs.

Because there is no realistic chance of passing a reform law as long as the GOP Senate believes their political lives depend on the LLC loophole, reformers have wasted a great deal of time yelling at the State Board of Elections to vote to close the loophole they have created. In April, the Board deadlocked 2-2 on a vote to close the loophole. The two Republicans voted to keep the loophole and the two Democrats to close it. Reformers were not happy, and Reinvent Albany joined other watchdog groups in a public letter which called the vote “Bad for Democracy.”

But there is some hope. In July, Risa, Sugerman, the State Board of Elections’ enforcement counsel,  sued the campaign of failed Brooklyn assembly candidate Shirley Patterson because it coordinated donations via LLCs. If Sugerman wins it could result in a precedent which sharply reduce the amount of political contributions made via LLCs.  Also in July, the Brennan Center for Justice sued the NY State Board of Elections for the utterly illogical way it interpreted election law. If either of these cases succeed, one of New York’s towering monuments to money in politics will come tumbling down.

 

Big Day for NYC Open Government as City Record Goes Online

August 10, 2015

Reinvent Albany and NYC Transparency Working Group members applaud the publishing of a treasure trove of information about basic workings of government on the City Record’s new website and database linked to downloads on NYC Open Data Portal.

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State FOIL Ombudsman Confirms: Agencies Must Provide Machine Readable Data in Machine Readable Format

August 6, 2015

opencapitolWe are getting an earful from public interest groups, academics and think tanks who are tired of state and city agencies responding to Freedom of Information requests with data locked in a near useless pdf format. It is not clear whether FOIL officers are doing this out of woeful ignorance or on purpose to spitefully waste the public’s time or hide data, but the result is the same: the public is not getting the information it is entitled to under the law.

In February, the New York State Committee on Open Government issued another advisory opinion confirming that agencies must provide machine-readable records in a machine readable format if that is what is requested in a Freedom of Information Law request. Robert Freeman, the director of COOG wrote to the requestor:

Although a printout of the record sought was made available, you previously requested and obtained not only equivalent, but additional material, in an Excel spreadsheet that included color codings. You asked in your recent request that the data be made available, again, in Excel with the same color codings.

It is clear that the agency either maintains the data at issue in Excel format or that it has the ability to disclose the data in that format. Because that is so, I believe that it is required to do so to comply with FOIL. It is emphasized that section 89(5) of FOIL states that: “An agency shall provide records on the medium requested by the person, if the agency can reasonably make such copy or have such copy made by engaging an outside professional service. Records provided in a computer format shall not be encrypted.”

Freeman doesn’t need to cite case law to interpret a particularly vague section of the law; he just reads the law. It’s pretty straightforward. Despite this, when Reinvent Albany files FOIL requests and specifically asks for machine-readable files, we often receive PDFs of spreadsheets. Tables in PDF files cannot be sorted, filtered, or – in many cases – searched; data stuck in PDF files is useless. This is just one more way agencies can stymie the freedom of information law and process.

Groups Urge Governor Cuomo to Sign FOIL-strengthening Bills

July 28, 2015

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Applause for Brennan Center Lawsuit Challenging LLC Loophole

July 14, 2015

The Brennan Center for Justice has just sued the New York State Board of Elections, asking a state court to rule that the Board must close the “LLC Loophole,” which allows huge amounts of untraceable political donations to be funneled through LLCs. The Board of Elections opened the loophole in 1996 when it ruled that LLCs are not corporations, and are therefore not subject to the $5,000 limit on political contributions like corporations are. The Brennan Center sent a public request in April to the Board of Elections to rescind its opinion about LLCs:

Under that Opinion, LLCs (limited liability companies) are treated as individuals rather than “corporations” or “partnerships” under the Election Law, entitling LLCs to a contribution limit that is more than eight times the corporate limit in statewide races, far higher than what the Legislature intended for artificial business entities. Moreover, the Board has permitted individuals who control multiple LLCs to use them to evade contribution limits entirely.

In one of the starkest examples, one wealthy contributor used 27 LLCs to contribute at least $4.3 million to political committees in the state over the past two years.3 The prevalence of such conduct is impossible to fully ascertain, because LLCs need not disclose the identities of their members or officers in their corporate filings.

We applaud the Brennan Center’s lawsuit, and hope to see the LLC Loophole closed as soon as possible.